RALEIGH (AP) — State lawmakers gave preliminary approval to a $19 billion budget Tuesday after legislative leaders and Gov. Beverly Perdue spent the day weighing whether it would cut spending enough, spread the pain fairly, and raise taxes no more than the public could accept.
The state spending plan unveiled late Monday would raise taxes on almost everyone, cost some state employees their jobs and force belt-tightening within public schools, universities and human services.
Democrats, who run both the House and Senate, called the spending blueprint austere to match the state's worst fiscal condition in a generation.
House Speaker Joe Hackney, D-Orange, who has served since 1981, called it "one of the most difficult budgets of my legislative career."
"It represents decisions that are carefully considered and it also represents decisions which have consequences," he said. "We know this has consequences for people who need services and the people who are, as state employees, paid to deliver those services."
Lawmakers approved the budget Tuesday in the first of two days of voting. The House voted 65-52 largely along party lines, while the Senate vote was 27-17. Final votes are expected in both chambers on Wednesday.
Perdue said she would sign the budget into law because lawmakers managed to shield public schools from bigger cuts and steered away from broader income tax increases. She said she would push counties and their school districts to spend some of the stimulus funds they are receiving to replace state funds and avoid laying off teachers.
"In my mind, it's going to really hard for somebody to explain to me why they had to cut teaching positions," she said. "I would not be here but for a public education, and I will go to my grave fighting for that education."
Democrats argued that the budget plan balances spending cuts with increased tax revenues, and said federal stimulus funds helped head off deeper cuts and layoffs. Republicans protested that raising taxes during the recession would stunt job creation and consumer spending, and slow economic recovery.
"People are asking about and pleading for jobs. Our answer to them is taxes," said Rep. David Lewis, R-Harnett.
The budget projects spending $19 billion in state revenues, plus more than $1 billion in federal stimulus money. Those spending projections could be reduced if the recession lingers and tax revenues fall further.
About 726 state employees will lose their jobs as a result of the budget cuts, or less than 1 percent of a work force of more than 97,000, said Rep. Mickey Michaux, D-Durham, a top House budget-writer. The budget contains no employee pay cuts or mandatory furloughs, Hackney said.
The General Assembly had planned for the state to spend $21.6 billion in the fiscal year that ended June 30, but the state spent less as tax revenues fell. Perdue balanced last year's budget by ordering employees to take unpaid time off and by using federal stimulus funds and tapping reserve funds: money set aside for emergencies and projects such as highway building and land purchases.
Preliminary figures show the state actually spent $19.65 billion last year, state Controller David McCoy's office said.
Republicans said Democrats resorted to the same formula they used to balance a budget during the last recession in 2001: raising taxes and promising the hikes will be temporary. GOP legislators noted that 80 percent of the tax increases come from raising the sales tax rate by a penny for the next two years.
"The taxes that they're talking about raising are going to hit every person in this state," said Senate Minority Leader Phil Berger, R-Rockingham. "The idea of shrinking government is something that they (Democrats) will not accept."
Hackney argued that besides spending cuts, Democrats had to pay for enrollment growth at community colleges and universities, rising prison costs and Medicaid inflation.
The proposed budget would spend about $346 million less on public schools than last year. An earlier plan to cut teaching positions in kindergarten through third-grade classrooms was dropped, but the state's 115 local school districts would have to figure out how to make their share of $225 million in spending cuts in grades 4-12. Local administrators could try replacing the state money with federal stimulus funds, but teacher layoffs and larger class sizes are also possible.
The spending plan also allocates about $1 billion less than last year for health and human services, though $857 million in reduced medical assistance payments will be offset by federal stimulus funds.
North Carolina, Connecticut and Pennsylvania are the only remaining states without a budget more than a month fiscal year started July 1.
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